A single-tier pension: what does it really mean? - The Institute For ...

More documents

Recommendations

Info

Short-run effect on pensioner incomes Figure 4.6 starts by describing the change in individual state pension income for the more limited sample just described in the year that the second partner in the couple (where relevant) reaches SPA, showing the distribution of changes in weekly pension income that would result from the introduction of the single-tier pension. These figures and all the analysis in this section assume that individuals continue to contribute until they reach SPA. When we consider the year in which the last household member reaches SPA rather than the year in which each individual reaches SPA, more people are counted as gaining from the single-tier pension (55% in Panel A compared with 43% – shown in Table 4.5 – across all individuals, 50% of men compared with 35%, and 64% of women compared with 61%). This is because of the more generous indexation of pension income post-SPA under the single-tier pension system than under the current pension system. In Panel B of Figure 4.6, we take total state pension income in the household and look at how that would differ between the single-tier system and the current system. The resulting distribution of gains is much more similar across the two sexes than the distribution of individual-level gains. Overall, 63% of individuals would see an increase in their total household state pension income of £1 or more, 34% would see an increase of £10 per week or more, and 15% of individuals would see a decline in their household state pension income of £1 or more. Finally, Panel C describes the distribution of the estimated change in total household income, taking into account any change in pension credit entitlement and the abolition of PCSC under the single-tier system. Once these changes to means-tested benefits are taken into account, the gains from the proposed reform are smaller; this is because the additional state pension income for some households is offset by lower means-tested benefits. For example, 43% of individuals would see no change or a reduction to their total household income as a result of the reforms, compared with 37% who would see no change or a decrease in their household state pension income. When we consider total household income instead of individual state pension income, 21% rather than 14% of individuals in households would lose more than £1 per week in income post-SPA; this arises from the abolition of savings credit. Overall, looking solely at changes in individual-level state pension income and ignoring means-tested benefit entitlement overstates the effect of the proposed reforms on household income. The extent to which this is important varies across groups with different characteristics. Table 4.7 shows the comparison for individuals with different characteristics. Looking at the average change in individual state pension income for individuals in each quintile of total net household wealth, we can see that the gains are largest on average for the lowest wealth groups, as described in Section 4.2. The poorest 20% of individuals gain £4.68 per week on average, compared with £2.53 for the richest quintile. 45
A single-tier pension: what does it really mean? Taking into account the change in state pension entitlement experienced by partners (central panel of Table 4.7) actually reverses this picture, with higherwealth households gaining on average £9.77 per week compared with £7.63 for the lowest-wealth households. This at least in part reflects the fact that higherwealth households are more likely than low-wealth ones to contain couples, rather than single people. Table 4.7. Percentage of gainers and losers from move to single-tier pension: by income definition and individual characteristics Individual state pension income Mean change % gain % lose Mean change Household state pension income % gain % lose Mean change Total household net income % gain % lose All 3.62 56% 15% 8.50 62% 15% 7.28 57% 21% Male 2.65 52% 15% 9.57 61% 14% 8.86 58% 18% Female 5.63 64% 14% 6.24 65% 16% 3.98 54% 27% SPA = 2016 2.95 37% 1% 7.66 46% 6% 6.08 40% 13% SPA = 2017 3.02 66% 19% 8.51 68% 18% 7.67 63% 23% SPA = 2018 3.67 63% 21% 8.41 71% 19% 7.48 66% 24% SPA = 2019 5.64 63% 24% 10.05 70% 21% 8.46 64% 27% Single 3.79 50% 16% 3.79 50% 16% -0.89 29% 40% Couple 3.56 58% 14% 10.02 66% 15% 9.91 66% 15% Any children 2.88 50% 14% 4.87 51% 13% 2.27 41% 25% No children 3.74 57% 15% 9.11 64% 15% 8.12 60% 20% Low education 3.59 53% 19% 8.01 60% 17% 6.20 52% 25% Mid education 3.91 59% 12% 7.80 64% 11% 6.77 60% 16% High education Quintiles of total household net wealth 3.26 57% 12% 10.26 63% 17% 9.81 61% 19% Lowest 4.68 58% 17% 7.63 64% 14% 2.37 40% 38% 2 2.99 49% 25% 5.66 52% 27% 5.27 49% 29% 3 4.62 63% 14% 9.68 68% 15% 9.31 66% 17% 4 3.23 62% 9% 9.75 68% 10% 9.75 68% 10% Highest 2.53 48% 9% 9.77 62% 10% 9.77 62% 10% Ever paid reduced-rate NI Self-employment years 5.64 54% 17% 5.75 58% 19% 4.37 54% 25% None 3.07 55% 16% 7.02 60% 17% 5.59 53% 24% 1 to 5 2.74 48% 16% 11.36 64% 15% 11.05 63% 16% 6 to 10 4.23 58% 12% 10.39 70% 8% 9.19 69% 9% More than 10 Contracted-out years 8.20 70% 9% 16.57 74% 7% 16.39 74% 7% None 5.40 62% 25% 7.97 66% 23% 4.81 52% 36% 1 to 5 5.12 58% 24% 9.42 70% 18% 6.09 51% 32% 6 to 10 2.75 42% 28% 7.13 43% 24% 4.46 34% 38% More than 10 3.01 56% 9% 8.68 63% 11% 8.45 62% 13% Note: As for Table 4.4. Source: Authors’ calculations using English Longitudinal Study of Ageing and National Insurance administrative data. 46
Page 1 and 2: A single-tier pension: what does it
Page 3 and 4: Published by The Institute for Fisc
Page 6: Contents Executive Summary 1 1. Int
Page 11 and 12: 1. Introduction In a White Paper pu
Page 51: A single-tier pension: what does it
Page 55 and 56: 5. Long-Run Effect of the Proposed
Page 69 and 70: 6. Wider implications of the propos
Page 75 and 76: 7. Conclusions Pensions Bill 2013-1
Page 77 and 78: References Attanasio, O. and Rohwed

A single-tier pension: what does it really mean? - The Institute For ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?